The invention is related to a credit card system, in particular to the implementation of a dual credit card system including the creation and usage of a dual credit card.
There are three types of consumer credit cards generally available to the public. The first type of card is a bankcard such as issued by a bank or other financial institution. Typical examples are a VISA®, MasterCard®, DISCOVER® or American Express Optima® cards. These cards allow purchase of goods and services and charges can be paid off monthly or have a portion paid monthly with remaining balance subject to interest. The user may pay an annual fee as well. There are usually different levels of these cards that range from a standard card, to a Gold Card or Platinum Card with different annual charges and different services. The credit provider sets a dollar limit depending upon the credit worthiness of the cardholder. The merchant pays an interchange fee based upon a percentage of the amount of the individual charge.
The second type of card is a charge card such as the American Express® series of cards. These cards allow the user to charge purchases and services to the account. The customer is expected to pay the balance in full monthly. There is usually no interest charged. The limit on purchases is not usually geared to any set amount but based upon the users usage history. There is an annual fee paid by the cardholder and the merchant pays a fee similar to the interchange fee based on the level of purchase. The American Express fee paid by the merchant is usually higher than the typical bankcard interchange fee.
The third type of card is the “private label” credit card. A private label credit card is issued by or on behalf of, a merchant such as Wal-Mart, Sears, or Brooks Brothers (some issued and serviced by the merchant, some issued and serviced by a financial institution). The financial transaction works very similar to a bankcard. The private label credit card's use is usually limited to the merchant issuing/sponsoring the credit card. The private label card user may pay the monthly charges or partially pay the balance and pay interest on the unpaid balance as with a bankcard. The merchant pays the financial institution a fee similar to the interchange fee of a bankcard. This fee is usually lower than the interchange fee with a bankcard. There are some retailers who issue and service their own private label card. Then there are companies like GE Capital who issue cards that are private labeled in the name of a retailer.
Consumers like the convenience of credit cards and like to take advantage of the services available from the various credit card services. However they find themselves having too many credit cards. An advantage of the private label credit card is the availability of special promotional financing offers (such as “no interest for x months” promotions) and merchandise information from the issuer or associated merchant of the private label credit card. The primary advantage of the bankcard is the almost universal acceptance world wide of a VISA® card, MasterCard®, or DISCOVER® card. These cards also typically have lower interest rates.
The merchants prefer that their customers use their private label credit card so that the merchant can use the monthly mailings as a vehicle of developing customer loyalty through special offers and other merchandising efforts. The merchants also prefer not to pay the higher interchange fees associated with generally available bankcards or the American Express card. The merchants also like the idea of a dedicated credit line for use in their retail store. However, many customers are reluctant to carry any more plastic in their wallets than absolutely necessary.
Therefore there is a need for a “dual credit card” that provides the merchant and consumers of the bankcard and the private label credit card.